Chapter 1 & 2

FORMULATION OF LINEAR PROGRAMMING PROBLEM

INTRODUCTION TO LINEAR PROGRAMMING

Linear Programming is a problem solving approach that has been developed to help managers
to make decisions.
Linear Programming is a mathematical technique for determining the optimum allocation of
resources and obtaining a particular objective when there are alternative uses of the resources,
money, manpower, material, machine and other facilities.

THE NATURE OF LINEAR PROGRAMMING PROBLEM

Two of the most common are:
1. The product-mix problem
2. The blending Problem
In the product- mix problem there are two or more product also called candidates or activities
competing for limited resources. The problem is to find out which products to include in
production plan and in what quantities these should be produced or sold in order to maximize
profit, market share or sales revenue.
The blending problem involves the determination of the best blend of available ingredients to
form a certain quantity of a product under strict specifications. The best blend means the least
cost blend of the required inputs.

FORMULATION OF THE LINEAR PROGRAMMING MODEL

Three components are:
1. The decision variable
2. The environment (uncontrollable) parameters
3. The result (dependent) variable

The Decision Variable

Objective Function

The Constraints

Linear Programming Model is composed of the same components

TERMINOLOGY USED IN LINEAR PROGRAMMING PROBLEM

1. Components of LP Problem: Every LPP is composed of a. Decision Variable, b.
Objective Function, c. Constraints.
2. Optimization: Linear Programming attempts to either maximise or minimize the values of
the objective function.
3. Profit of Cost Coefficient: The coefficient of the variable in the objective function
express the rate at which the value of the objective function increases or decreases by
including in the solution one unit of each of the decision variable.

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4. Constraints: The maximisation (or minimisation) is performed subject to a set of
constraints. Therefore LP can be defined as a constrained optimisation problem. They reflect
the limitations of the resources.
5. Input-Output coefficients: The coefficient of constraint variables are called the Input-
Output Coefficients. They indicate the rate at which a given resource is unitized or depleted.
They appear on the left side of the constraints.
6. Capacities: The capacities or availability of the various resources are given on the right
hand side of the constraints.

THE MATHEMATICAL EXPRESSION OF THE LP MODEL

The general LP Model can be expressed in mathematical terms as shown below:
Let
Oij = Input-Output Coefficient
Cj = Cost (Profit) Coefficient
bi = Capacities (Right Hand Side)
Xj = Decision Variables
Find a vector (x1, x2, x3 ..........xn) that minimise or maximise a linear objective function F(x)
where F(x) = c1x1 + c2x2 +................+ cnxn
subject to linear constraints
a1x1 + a2x2 +................+ anxn = b2
a1x1 + a2x2 +...............+ anxn ≤ b2
.......................................................
.......................................................
.......................................................
.......................................................
am1x1 + am2x2 + ................+ amnxn ≤ b2
and non-negativity constraints
x1 ≥ 0, x2 ≥ 0,................, xn ≥ 0

FORMULATION OF LPP
STEPS
1. Identify decision variables
2. Write objective function
3. Formulate constraints
EXAMPLE 1. (PRODUCTION ALLOCATION PROBLEM)
A firm produces three products. These products are processed on three different machines.
The time required to manufacture one unit of each of the three products and the daily capacity
of the three machines are given in the table below:
Time per unit (Minutes) Machine Capacity
Machine Product 1 Product 2 Product 3 (minutes/day)
M1 2 3 2 440
M2 4 - 3 470
M3 2 5 - 430

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It is required to determine the daily number of units to be manufactured for each product. The
profit per unit for product 1, 2 and 3 is Rs. 4, Rs.3 and Rs.6 respectively. It is assumed that all
the amounts produced are consumed in the market. Formulate the mathematical (L.P.) model
that will maximize the daily profit.
Formulation of Linear Programming Model
Step 1
From the study of the situation find the key-decision to be made. In the given situation key
decision is to decide the extent of products 1, 2 and 3, as the extents are permitted to vary.
Step 2
Assume symbols for variable quantities noticed in step 1. Let the extents (amounts) of
products 1, 2 and 3 manufactured daily be x1, x2 and x3 units respectively.
Step 3
Express the feasible alternatives mathematically in terms of variable. Feasible alternatives are
those which are physically, economically and financially possible. In the given situation
feasible alternatives are sets of values of x1, x2 and x3 units respectively.
where x1, x2 and x3 ≥ 0.
since negative production has no meaning and is not feasible.
Step 4
Mention the objective function quantitatively and express it as a linear function of variables.
In the present situation, objective is to maximize the profit.
i.e., Z = 4x1+ 3x2 + 6x3
Step 5
Put into words the influencing factors or constraints. These occur generally because of
constraints on availability (resources) or requirements (demands). Express these constraints
also as linear equations/inequalities in terms of variables.
Here, constraints are on the machine capacities and can be mathematically expressed as
2x1+ 3x2 + 2x3 ≤ 440
4x1+ 0x2 + 3x3 ≤ 470
2x1+ 5x2 + 0x3 ≤ 430
EXAMPLE 2: PRODUCT MIX PROBLEM
A factory manufactures two products A and B. To manufacture one unit of A, 1.5 machine
hours and 2.5 labour hours are required. To manufacture product B, 2.5 machine hours and
1.5 labour hours are required. In a month, 300 machine hours and 240 labour hours are
available.
Profit per unit for A is Rs. 50 and for B is Rs. 40. Formulate as LPP.
Solution:
Products Resource/unit
Machine Labour
A 1.5 2.5
B 2.5 1.5
Availability 300 hrs 240 hrs
There will be two constraints. One for machine hours availability and for labour hours
availability.
Decision variables

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 X1 = Number of units of A manufactured per month.
X2 = Number of units of B manufactured per month.
The objective function:
Max Z = 50x1+ 40x2
Subjective Constraints
For machine hours
1.5x1+ 2.5x2 ≤ 300
For labour hours
2.5x1+ 1.5x2 ≤ 240
Non negativity
x1, x2 ≥0
EXAMPLE: 3
A company produces three products A, B, C.
For manufacturing three raw materials P, Q and R are used.
Profit per unit
A - Rs. 5, B - Rs. 3, C - Rs. 4
Resource requirements/unit
Raw Material P Q R
Product
A - 20 50
B 20 30 -
C 30 20 40
Maximum raw material availability:
P - 80 units; Q - 100 units; R - 150 units. Formulate LPP.
Solution:
Decision variables:
x1 = Number of units of A
x2 = Number of units of B
x3 = Number of units of C
Objective Function
Since Profit per unit is given, objective function is maximisation
Max Z = 5x1+ 3x2 + 4x3
Constraints:
For P:
0x1+ 20x2 + 30x3 ≤ 80
For Q:
20x1+ 30x2 + 20x3 ≤ 100
For R:
50x1+ 0x2 + 40x3 ≤ 150
(for B, R is not required)
X1, X2, X3 ≥ 0
EXAMPLE 4: PORTFOLIO SELECTION (INVESTMENT DECISIONS)
An investor is considering investing in two securities 'A' and 'B'. The risk and return
associated with these securities is different.
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Security 'A' gives a return of 9% and has a risk factor of 5 on a scale of zero to 10. Security
'B' gives return of 15% but has risk factor of 8.
Total amount to be invested is Rs. 5, 00, 000/- Total minimum returns on the investment
should be 12%. Maximum combined risk should not be more than 6. Formulate as LPP.
Solution:
Decision Variables:
X1 = Amount invested in Security A
X2 = Amount invested in Security B
Objective Function:
The objective is to maximise the return on total investment.
⸫ Max Z = 0.09 X1 + 0.015 X2 ((% = 0.09, 15% = 0.15)
Constraints:
1. Related to Total Investment:
X1 + X2 = 5, 00, 000
2. Related to Risk:
5X1 + 8X2 = (6 X 5, 00, 000)
5X1 + 8X2 = 30, 00, 000
3. Related to Returns:
0.09X1 + 0.15X2 = (0.12 X 5, 00, 000)
⸫0.09X1 + 0.15X2 = 60, 000
4. Non-negativity
X1, X2 ≥ 0
EXAMPLE 5: INSPECTION PROBLEM
A company has two grades of inspectors, I and II to undertake quality control inspection. At
least 1, 500 pieces must be inspected in an 8-hour day. Grade I inspector can check 20 pieces
in an hour with an accuracy of 96%. Grade II inspector checks 14 pieces an hour with an
accuracy of 92%.
Wages of grade I inspector are Rs. 5 per hour while those of grade II inspector are Rs. 4 per
hour. Any error made by an inspector costs Rs. 3 to the company. If there are, in all, 10 grade
I inspectors and 15 grade II inspectors in the company, find the optimal assignment of
inspectors that minimise the daily inspection cost.
Solution:
Let x1 and x2 denote the number of grade I and grade II inspectors that may be assigned the
job of quality control inspection.
The objective is to minimise the daily cost of inspection. Now the company has to incur two
types of costs; wages paid to the inspectors and the cost of their inspection errors. The cost of
grade I inspector/hour is
Rs. (5 + 3 X 0.04 X 20) = Rs. 7.40.
Similarly, cost of grade II inspector/hour is
Rs. (4 + 3 X 0.08 X 14) = Rs. 7.36.
⸫ The objective function is
minimise Z = 8(7.40x1 + 7.36x2) = 59.20 x1 + 58.88x2.
Constraints are
on the number of grade I inspectors: x1 ≤ 10,
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on the number of grade II inspectors: x2 ≤ 15
on the number of pieces to be inspected daily: 20 x 8x1 + 14 x 8x2 ≥ 1500
or 160x1 + 112x2 ≥ 1500
where, x1, x2 ≥ 0.
EXAMPLE 6: TRIM LOSS PROBLEM
A manufacturer of cylindrical containers receives tin sheets in widths of 30 cm and 60 cm
respectively. For these containers the sheets are to be cut to three different widths of 15 cm,
21 cm and 27 cm respectively. The number of containers to be manufactured from these three
widths are 400, 200 and 300 respectively. The bottom plates and top covers of the containers
are purchased directly from the market. There is no limit on the lengths of standard tin sheets.
Formulate the LPP for the production schedule that minimises the trim losses.
Solution:
Key decision is to determine how each of the two standard widths of tin sheets be cut to the
require widths so that trim losses are minimum.
From the available widths of 30 cm and 60 cm, several combinations of the three required
widths of 15 cm, 21 cm and 27 cm are possible.
Let xij represent these combinations. Each combination results in certain trim loss.
Constraints can be formulated as follows:
The possible cutting combinations (plans) for both types of sheets are shown in the table
below:
Width i = I (30 cm) i = II (60 cm)
(cm)
X11 X12 X13 X21 X22 X23 X24 X25 X26
15 2 0 0 4 2 2 1 0 0
21 0 1 0 0 1 0 2 1 0
27 0 0 1 0 0 1 0 1 2
Trim Loss 0 9 3 0 9 3 3 12 6
(cm)
Thus, the constraints are
2x11 + 4x21 + 2x22 + 2x23 + x24 ≥ 400
x12 + x22 + 2x24 + x25 ≥ 200
x13 +x23 + x25 + x26 ≥ 300
Objective is to maximise the trim losses.
i.e., minimise Z = 9x12 + 3x13 + 9x22 + 3x23 + 3x24 + 12x25 + 6x26
where x11, x12, x13, x21, x22, x23, x24, x25, x26 ≥ 0.
EXAMPLE 7: MEDIA SELECTION
An advertising agency is planning to launch an ad campaign. Media under consideration are
T.V., Radio & Newspaper. Each medium has different reach potential and different cost.
Minimum 10, 000, 000 households are to be reached through T.V. Expenditure on
newspapers should not be more than Rs. 10, 00, 000. Total advertising budget is Rs. 20
million.
Following data is available:
Medium Cost per Unit Reach per unit
(Rs.) (No. of households)
Television 2, 00, 000 20, 00, 000
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 Radio 80, 000 10, 00, 000
Newspaper 40, 000 2, 00, 000

Solution:
Decision Variables:
x1 = Number of units of T.V. ads,
x2 = Number of units of Radio ads,
x3 = Number of units of Newspaper ads.
Objective function: (Maximise reach)
Max. Z = 20, 00, 000 x1 + 10, 00, 000 x2 + 2, 00, 000x3
Subject to constraints:
20, 00, 000 x1 ≥ 10, 000, 000.........(for T.V.)
40, 000 x3 ≤ 10, 00, 000............(for Newspaper)
2, 00, 000x1 + 80, 000x2 + 40, 000x3 ≤ 20, 000, 000............(Ad. budget)
x1, x2, x3 ≥ 0
⸫ Simplifying constraints:
for T.V. 2 x1 ≥ 10 ⸫ x1 ≥ 5
for Newspaper 4 x3 ≤ 100 ⸫ x3 ≤ 25
Ad. Budget
20 x1 + 8 x2 + 4 x3 ≤ 2000
5 x1 + 2x2 + x3 ≤ 500
x1, x2, x3 ≥ 0
EXAMPLE 8: DIET PROBLEM
Vitamins B1 and B2 are found in two foods F1 and F2. 1 unit of F1 contains 3 units of B1 and 4
units of B2. 1 unit of F2 contains 5 units of B1 and 3 units of B2 respectively.
Minimum daily prescribed consumption of B1 & B2 is 50 and 60 units respectively. Cost per
unit of F1 & F2 is Rs. 6 & Rs. 3 respectively.
Formulate as LPP.
Solution:
Vitamins Foods Minimum
F1 F2 Consumption
B1 3 5 30
B2 5 7 40
Decision Variables:
x1 = No. of units of P1 per day.
x2 = No. of units of P2 per day.
Objective function:
Min. Z = 100 x1 + 150 x2
Subject to constraints:
3x1+ 5x2 ≥ 30 (for N1)
5x1+ 7x2 ≥ 40 (for N2)
x1, x2 ≥ 0
EXAMPLE 9: BLENDING PROBLEM
A manager at an oil company wants to find optimal mix of two blending processes.
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Formulate LPP.

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Data:
Process Input (Crude Oil) Output (Gasoline)
Grade A Grade B X Y
P1 6 4 6 9
P2 5 6 5 5
Profit per operation: Process 1 (P1) = Rs. 4, 000
Process 2 (P2) = Rs. 5, 000
Maximum availability of crude oil: Grade A = 500 units
Grade B = 400 units
Minimum Demand for Gasoline: X = 300 units
Y = 200 units
Solution:
Decision Variables:
x1 = No. of operations of P1
x2 = No. of operations of P2
Objective Function:
Max. Z = 4000 x1 + 5000 x2
Subjective to constraints:
6x1+ 5x2 ≤ 500
4x1+ 6x2 ≤ 400
6x1+ 5x2 ≥300
9x1+ 5x2 ≥200
x1, x2 ≥ 0
EXAMPLE 10: FARM PLANNING
A farmer has 200 acres of land. He produces three products X, Y & Z. Average yield per acre
for X, Y & Z is 4000, 6000 and 2000 kg.
Selling price of X, Y & Z is Rs. 2, 1.5 & 4 per kg respectively. Each product needs fertilizers.
Cost of fertilizer is Rs. 1 per kg. Per acre need for fertilizer for X, Y & Z is 200, 200 & 100
kg respectively. Labour requirements for X, Y & Z is 10, 12 & 10 man hours per acre. Cost
of labour is Rs. 40 per man hour. Maximum availability of labour is 20, 000 man hours.
Formulate as LPP to maximise profit.
Solution:
Decision variables:
The production/yield of three products X, Y & Z is given as per acre.
Hence,
x1 = No. of acres allocated to X
x2 = No. of acres allocated to Y
x3 = No. of acres allocated to Z
Objective Function:
Profit = Revenue - Cost
Profit = Revenue - (Fertiliser Cost + Labour Cost)
Product X Y Z
Revenue 2 (4000) x 1 1.5 (6000) x 2 4 (2000) x3
(-) Less:
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 Fertiliser Cost 1 (200) x1 1 (200) x2 1 (100) x3
Labour Cost 40 (10) x 1 40 (12) x2 40 (10) x3
Profit 7400 x1 8320 x2 7500 x3
⸫ Objective function
Max. = 7400 x1 + 8320 x2 + 7500 x3
Subject to constraints:
x1 + x2 + x3 = 200 (Total Land)
10 x1 + 12 x2 + 10 x3 ≤ 20, 000 (Max Man
hours) x1, x2, x3 ≥ 0

MERITS OF LPP
1. Helps management to make efficient use of resources.
2. Provides quality in decision making.
3. Excellent tools for adjusting to meet changing demands.
4. Fast determination of the solution if a computer is used.
5. Provides a natural sensitivity analysis.
6. Finds solution to problems with a very large or infinite number of possible solution.

DEMERITS OF LPP
1. Existence of non-linear equation: The primary requirements of Linear Programming
is the objective function and constraint function should be linear. Practically linear
relationship do not exist in all cases.
2. Interaction between variables: LP fails in a situation where non-linearity in the
equation emerge due to joint interaction between some of the activities like total
effectiveness.
3. Fractional Value: In LPP fractional values are permitted for the decision variable.
Knowledge of Coefficients of the equation: It may not be possible to state all coefficients in
the objective function and constraints with c

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1.1 Introduction The British/Europeans refer to "operational research", the Americans to
"operations research" - but both are often shortened to just "OR" - which is the term we will
use. Another term which is used for this field is "management science" ("MS"). The
Americans sometimes combine the terms OR and MS together and say "OR/MS" or
"ORMS". Yet other terms sometimes used are "industrial engineering" ("IE") and "decision
science" ("DS"). In recent years there has been a move towards a standardization upon a
single term for the field, namely the term "OR". Operation Research is a relatively new
discipline. The contents and the boundaries of the OR are not yet fixed. Therefore, to give a
formal definition of the term Operations Research is a difficult task. The OR starts when
mathematical and quantitative techniques are used to substantiate the decision being taken.
The main activity of a manager is the decision making. In our daily life we make the
decisions even without noticing them. The decisions are taken simply by common sense,
judgment and expertise without using any mathematical or any other model in simple
situations. But the decision we are concerned here with are complex and heavily responsible.
Examples are public transportation network planning in a city having its own layout of
factories, residential blocks or finding the appropriate product mix when there exists a large
number of products with different profit contributions and production requirement etc.
Operations Research tools are not from any one discipline. Operations Research takes tools
from different discipline such as mathematics, statistics, economics, psychology, engineering
etc. and combines these tools to make a new set of knowledge for decision making. Today,
O.R. became a professional discipline which deals with the application of scientific methods
for making decision, and especially to the allocation of scarce resources. The main purpose of
O.R. is to provide a rational basis for decisions making in the absence of complete
information, because the systems composed of human, machine, and procedures may do not
have complete information. Operations Research can also be treated as science in the sense it
describing, understanding and predicting the systems behaviour, especially man-machine
system. Thus O.R. specialists are involved in three classical aspect of science, they are as
follows: i) Determining the systems behaviour ii) Analyzing the systems behaviour by
developing appropriate models iii) Predict the future behaviour using these models The
emphasis on analysis of operations as a whole distinguishes the O.R. from other research and
engineering. O.R. is an interdisciplinary discipline which provided solutions to problems of
military operations during World War II, and also successful in other operations. Today
business applications are MBA-H2040 Quantitative Techniques for Managers primarily
concerned with O.R. analysis for the possible alternative actions. The business and industry
befitted from O.R. in the areas of inventory, reorder policies, optimum location and size of
warehouses, advertising policies, etc. As stated earlier defining O.R. is a difficult task. The
definitions stressed by various experts and Societies on the subject together enable us to
know what O.R. is, and what it does. They are as follows: 1. According to the Operational
Research Society of Great Britain (OPERATIONAL RESEARCH QUARTERLY, l3(3):282,
l962), Operational Research is the attack of modern science on complex problems arising in
the direction and management of large systems of men, machines, materials and money in
industry, business, government and defense. Its distinctive approach is to develop a scientific
model of the system, incorporating measurements of factors such as change and risk, with
which to predict and compare the outcomes of alternative decisions, strategies or controls.
The purpose is to help management determine its policy and actions scientifically. 2. Randy
Robinson stresses that Operations Research is the application of scientific methods to
improve the effectiveness of operations, decisions and management. By means such as
analyzing data, creating mathematical models and proposing innovative approaches,
Operations Research professionals develop scientifically based information that gives insight

11
and guides decisionmaking. They also develop related software, systems, services and
products. 3. Morse and Kimball have stressed O.R. is a quantitative approach and described it
as “ a scientific method of providing executive departments with a quantitative basis for
decisions regarding the operations under their control”. 4. Saaty considers O.R. as tool of
improving quality of answers. He says, “O.R. is the art of giving bad answers to problems
which otherwise have worse answers”. 5. Miller and Starr state, “O.R. is applied decision
theory, which uses any scientific, mathematical or logical means to attempt to cope with the
problems that confront the executive, when he tries to achieve a thorough-going rationality in
dealing with his decision problem”. 6. Pocock stresses that O.R. is an applied Science. He
states “O.R. is scientific methodology (analytical, mathematical, and quantitative) which by
assessing the overall implication of various alternative courses of action in a management
system provides an improved basis for management decisions”. 1.2 History of Operations
Research Operation Research is a relatively new discipline. Whereas 70 years ago it would
have been possible to study mathematics, physics or engineering (for example) at university it
would not have been possible to study Operation Research, indeed the term O.R. did not exist
then. It was really only in the late 1930's that operational research began in a systematic
fashion, and it started in the UK. As such it would be interesting to give a short history of
O.R. 1936 MBA-H2040 Quantitative Techniques for Managers Early in 1936 the British Air
Ministry established Bawdsey Research Station, on the east coast, near Felixstowe, Suffolk,
as the centre where all pre-war radar experiments for both the Air Force and the Army would
be carried out. Experimental radar equipment was brought up to a high state of reliability and
ranges of over 100 miles on aircraft were obtained. It was also in 1936 that Royal Air Force
(RAF) Fighter Command, charged specifically with the air defense of Britain, was first
created. It lacked however any effective fighter aircraft - no Hurricanes or Spitfires had come
into service - and no radar data was yet fed into its very elementary warning and control
system. It had become clear that radar would create a whole new series of problems in fighter
direction and control so in late 1936 some experiments started at Biggin Hill in Kent into the
effective use of such data. This early work, attempting to integrate radar data with ground
based observer data for fighter interception, was the start of OR. 1937 The first of three major
pre-war air-defence exercises was carried out in the summer of 1937. The experimental radar
station at Bawdsey Research Station was brought into operation and the information derived
from it was fed into the general air-defense warning and control system. From the early
warning point of view this exercise was encouraging, but the tracking information obtained
from radar, after filtering and transmission through the control and display network, was not
very satisfactory. 1938 In July 1938 a second major air-defense exercise was carried out.
Four additional radar stations had been installed along the coast and it was hoped that Britain
now had an aircraft location and control system greatly improved both in coverage and
effectiveness. Not so! The exercise revealed, rather, that a new and serious problem had
arisen. This was the need to coordinate and correlate the additional, and often conflicting,
information received from the additional radar stations. With the outbreak of war apparently
imminent, it was obvious that something new - drastic if necessary - had to be attempted.
Some new approach was needed. Accordingly, on the termination of the exercise, the
Superintendent of Bawdsey Research Station, A.P. Rowe, announced that although the
exercise had again demonstrated the technical feasibility of the radar system for detecting
aircraft, its operational achievements still fell far short of requirements. He therefore
proposed that a crash program of research into the operational - as opposed to the technical -
aspects of the system should begin immediately. The term "operational research"
[RESEARCH into MBA-H2040 Quantitative Techniques for Managers (military)
OPERATIONS] was coined as a suitable description of this new branch of applied science.
The first team was selected from amongst the scientists of the radar research group the same

12
day. 1939 In the summer of 1939 Britain held what was to be its last pre-war air defence
exercise. It involved some 33,000 men, 1,300 aircraft, 110 antiaircraft guns, 700 searchlights,
and 100 barrage balloons. This exercise showed a great improvement in the operation of the
air defence warning and control system. The contribution made by the OR team was so
apparent that the Air Officer Commander-in-Chief RAF Fighter Command (Air Chief
Marshal Sir Hugh Dowding) requested that, on the outbreak of war, they should be attached
to his headquarters at Stanmore in north London. Initially, they were designated the
"Stanmore Research Section". In 1941 they were redesignated the "Operational Research
Section" when the term was formalised and officially accepted, and similar sections set up at
other RAF commands. 1940 On May 15th 1940, with German forces advancing rapidly in
France, Stanmore Research Section was asked to analyses a French request for ten additional
fighter squadrons (12 aircraft a squadron - so 120 aircraft in all) when losses were running at
some three squadrons every two days (i.e. 36 aircraft every 2 days). They prepared graphs for
Winston Churchill (the British Prime Minister of the time), based upon a study of current
daily losses and replacement rates, indicating how rapidly such a move would deplete fighter
strength. No aircraft were sent and most of those currently in France were recalled. This is
held by some to be the most strategic contribution to the course of the war made by OR (as
the aircraft and pilots saved were consequently available for the successful air defense of
Britain, the Battle of Britain). 1941 onward In 1941, an Operational Research Section (ORS)
was established in Coastal Command which was to carry out some of the most well-known
OR work in World War II. The responsibility of Coastal Command was, to a large extent, the
flying of long-range sorties by single aircraft with the object of sighting and attacking
surfaced U-boats (German submarines). The technology of the time meant that (unlike
modern day submarines) surfacing was necessary to recharge batteries, vent the boat of fumes
and recharge air tanks. Moreover U-boats were much faster on the surface than underwater as
well as being less easily detected by sonar. MBA-H2040 Quantitative Techniques for
Managers Thus the Operation Research started just before World War II in Britain with the
establishment of teams of scientists to study the strategic and tactical problems involved in
military operations. The objective was to find the most effective utilization of limited military
resources by the use of quantitative techniques. Following the end of the war OR spread,
although it spread in different ways in the UK and USA. In 1951 a committee on Operations
Research formed by the National Research Council of USA, and the first book on “Methods
of Operations Research”, by Morse and Kimball, was published. In 1952 the Operations
Research Society of America came into being. Success of Operations Research in army
attracted the attention of the industrial mangers who were seeking solutions to their complex
business problems. Now a days, almost every organization in all countries has staff applying
operations research, and the use of operations research in government has spread from
military to wide variety of departments at all levels. The growth of operations research has
not limited to the U.S.A. and U.K., it has reached many countries of the world. India was one
the few first countries who started using operations research. In India, Regional Research
Laboratory located at Hyderabad was the first Operations Research unit established during
1949. At the same time another unit was set up in Defense Science Laboratory to solve the
Stores, Purchase and Planning Problems. In 1953, Operations Research unit was established
in Indian Statistical Institute, Calcutta, with the objective of using Operations Research
methods in National Planning and Survey. In 1955, Operations Research Society of India was
formed, which is one of the first members of International Federation of Operations Research
societies. Today Operations Research is a popular subject in management institutes and
schools of mathematics. 1.3 Stages of Development of Operations Research The stages of
development of O.R. are also known as phases and process of O.R, which has six important
steps. These six steps are arranged in the following order: Step I: Observe the problem

13
environment Step II: Analyze and define the problem Step III: Develop a model Step IV:
Select appropriate data input Step V: Provide a solution and test its reasonableness Step VI:
Implement the solution MBA-H2040 Quantitative Techniques for Managers Step I: Observe
the problem environment The first step in the process of O.R. development is the problem
environment observation. This step includes different activities; they are conferences, site
visit, research, observations etc. These activities provide sufficient information to the O.R.
specialists to formulate the problem. Step II: Analyze and define the problem This step is
analyzing and defining the problem. In this step in addition to the problem definition the
objectives, uses and limitations of O.R. study of the problem also defined. The outputs of this
step are clear grasp of need for a solution and its nature understanding. Step III: Develop a
model This step develops a model; a model is a representation of some abstract or real
situation. The models are basically mathematical models, which describes systems, processes
in the form of equations, formula/relationships. The different activities in this step are
variables definition, formulating equations etc. The model is tested in the field under different
environmental constraints and modified in order to work. Some times the model is modified
to satisfy the management with the results. Step IV: Select appropriate data input A model
works appropriately when there is appropriate data input. Hence, selecting appropriate input
data is important step in the O.R. development stage or process. The activities in this step
include internal/external data analysis, fact analysis, and collection of opinions and use of
computer data banks. The objective of this step is to provide sufficient data input to operate
and test the model developed in Step_III. Step V: Provide a solution and test its
reasonableness This step is to get a solution with the help of model and input data. This
solution is not implemented immediately, instead the solution is used to test the model and to
find there is any limitations. Suppose if the solution is not reasonable or the behaviour of the
model is not proper, the model is updated and modified at this stage. The output of this stage
is the solution(s) that supports the current organizational objectives. Step VI: Implement the
solution MBA-H2040 Quantitative Techniques for Managers At this step the solution
obtained from the previous step is implemented. The implementation of the solution involves
mo many behavioural issues. Therefore, before implementation the implementation authority
has to resolve the issues. A properly implemented solution results in quality of work and
gains the support from the management. The process, process activities, and process output
are summarized in the following Table 1-1. Process Activities Process Process Output Site
visits, Conferences, Observations, Research Sufficient information and support to proceed
Define: Use, Objectives, limitations Clear grasp of need for and nature of solution requested
Define interrelationships, Formulate equations, Use known O.R. Model , Search alternate
Model Models that works under stated environmental constraints Analyze: internal-external
data, facts Collect options, Use computer data banks Sufficient inputs to operate and test
model Test the model find limitations update the model Solution(s) that support current
organizational goals Step 1: Observe the problem environment Step 2: Analyze and define
the problem Step 3: Develop a Model Step 4: Select appropriate data input Step 5: Provide a
solution and test its reasonableness Step 6: Implement the solution MBA-H2040 Quantitative
Techniques for Managers Resolve behavioural issues Sell the idea Give explanations
Management involvement Improved working and Management support for longer run
operation of model Table 1-1: Process, Process activities, Process output of O.R.
development stages 1.4 Relationship between the Manager and O.R. Specialist The key
responsibility of manager is decision making. The role of the O.R. specialist is to help the
manager make better decisions. Figure 1-1 explains the relationship between the O.R.
specialist and the manager/decision maker. STEPS IN PROBLEM RECOGNITION,
INVOLVEMENT: O.R. SPECIALIST or FORMULATION AND SOLUTION MANAGER
Recognize from organizational symptoms that a problem exists. Decide what variables are

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involved; state the problem in quantitative relationships among the variables. Investigate
methods for solving the problems as stated above; determine appropriate quantitative tools to
be used. Attempt solutions to the problems; find various solutions; state assumptions
underlying these solutions; test alternative solutions. Determine which solution is most
effective because of practical constraints within the organization; decide what the solution
means for the organization. Manager Manager and O.R. Specialist O.R. Specialist O.R.
Specialist Manager and O.R. Specialist MBA-H2040 Quantitative Techniques for Managers
Figure 1-1 Relationship between Manager/Decision Maker and O.R. Specialists 1.5 O.R.
Tools and Techniques Operations Research uses any suitable tools or techniques available.
The common frequently used tools/techniques are mathematical procedures, cost analysis,
electronic computation. However, operations researchers given special importance to the
development and the use of techniques like linear programming, game theory, decision
theory, queuing theory, inventory models and simulation. In addition to the above techniques,
some other common tools are non-linear programming, integer programming, dynamic
programming, sequencing theory, Markov process, network scheduling (PERT/CPM),
symbolic Model, information theory, and value theory. There is many other Operations
Research tools/techniques also exists. The brief explanations of some of the above
techniques/tools are as follows: Linear Programming: This is a constrained optimization
technique, which optimize some criterion within some constraints. In Linear programming
the objective function (profit, loss or return on investment) and constraints are linear. There
are different methods available to solve linear programming. Game Theory: This is used for
making decisions under conflicting situations where there are one or more players/opponents.
In this the motive of the players are dichotomized. The success of one player tends to be at
the cost of other players and hence they are in conflict. Decision Theory: Decision theory is
concerned with making decisions under conditions of complete certainty about the future
outcomes and under conditions such that we can make some probability about what will
happen in future. Queuing Theory: Choose the solution to be used. ‘Sell’ the decision to
operating managers; get their understanding and cooperation. Manager Manager and O.R.
Specialist MBA-H2040 Quantitative Techniques for Managers This is used in situations
where the queue is formed (for example customers waiting for service, aircrafts waiting for
landing, jobs waiting for processing in the computer system, etc). The objective here is
minimizing the cost of waiting without increasing the cost of servicing. Inventory Models:
Inventory model make a decisions that minimize total inventory cost. This model
successfully reduces the total cost of purchasing, carrying, and out of stock inventory.
Simulation: Simulation is a procedure that studies a problem by creating a model of the
process involved in the problem and then through a series of organized trials and error
solutions attempt to determine the best solution. Some times this is a difficult/time consuming
procedure. Simulation is used when actual experimentation is not feasible or solution of
model is not possible. Non-linear Programming: This is used when the objective function and
the constraints are not linear in nature. Linear relationships may be applied to approximate
non-linear constraints but limited to some range, because approximation becomes poorer as
the range is extended. Thus, the non-linear programming is used to determine the
approximation in which a solution lies and then the solution is obtained using linear methods.
Dynamic Programming: Dynamic programming is a method of analyzing multistage decision
processes. In this each elementary decision depends on those preceding decisions and as well
as external factors. Integer Programming: If one or more variables of the problem take
integral values only then dynamic programming method is used. For example number or
motor in an organization, number of passenger in an aircraft, number of generators in a power
generating plant, etc. Markov Process: Markov process permits to predict changes over time
information about the behavior of a system is known. This is used in decision making in

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situations where the various states are defined. The probability from one state to another state
is known and depends on the current state and is independent of how we have arrived at that
particular state. MBA-H2040 Quantitative Techniques for Managers Network Scheduling:
This technique is used extensively to plan, schedule, and monitor large projects (for example
computer system installation, R & D design, construction, maintenance, etc.). The aim of this
technique is minimize trouble spots (such as delays, interruption, production bottlenecks,
etc.) by identifying the critical factors. The different activities and their relationships of the
entire project are represented diagrammatically with the help of networks and arrows, which
is used for identifying critical activities and path. There are two main types of technique in
network scheduling, they are: Program Evaluation and Review Technique (PERT) – is used
when activities time is not known accurately/ only probabilistic estimate of time is available.
Critical Path Method (CPM) – is used when activities time is know accurately. Information
Theory: This analytical process is transferred from the electrical communication field to O.R.
field. The objective of this theory is to evaluate the effectiveness of flow of information with
a given system. This is used mainly in communication networks but also has indirect
influence in simulating the examination of business organizational structure with a view of
enhancing flow of information. 1.6 Applications of Operations Research Today, almost all
fields of business and government utilizing the benefits of Operations Research. There are
voluminous of applications of Operations Research. Although it is not feasible to cover all
applications of O.R. in brief. The following are the abbreviated set of typical operations
research applications to show how widely these techniques are used today: Accounting:
Assigning audit teams effectively Credit policy analysis Cash flow planning Developing
standard costs Establishing costs for byproducts Planning of delinquent account strategy
Construction: Project scheduling, monitoring and control Determination of proper work force
Deployment of work force Allocation of resources to projects Facilities Planning: Factory
location and size decision Estimation of number of facilities required Hospital planning
MBA-H2040 Quantitative Techniques for Managers International logistic system design
Transportation loading and unloading Warehouse location decision Finance: Building cash
management models Allocating capital among various alternatives Building financial
planning models Investment analysis Portfolio analysis Dividend policy making
Manufacturing: Inventory control Marketing balance projection Production scheduling
Production smoothing Marketing: Advertising budget allocation Product introduction timing
Selection of Product mix Deciding most effective packaging alternative Organizational
Behavior / Human Resources: Personnel planning Recruitment of employees Skill balancing
Training program scheduling Designing organizational structure more effectively Purchasing:
Optimal buying Optimal reordering Materials transfer Research and Development: R & D
Projects control R & D Budget allocation Planning of Product introduction 1.7 Limitations of
Operations Research Operations Research has number of applications; similarly it also has
certain limitations. These limitations are mostly related to the model building and money and
time factors problems involved in its application. Some of them are as given below: i)
Distance between O.R. specialist and Manager Operations Researchers job needs a
mathematician or statistician, who might not be aware of the business problems. Similarly, a
manager is unable to understand the complex nature of Operations Research. Thus there is a
big gap between the two personnel. ii) Magnitude of Calculations MBA-H2040 Quantitative
Techniques for Managers The aim of the O.R. is to find out optimal solution taking into
consideration all the factors. In this modern world these factors are enormous and expressing
them in quantitative model and establishing relationships among these require voluminous
calculations, which can be handled only by machines. iii) Money and Time Costs The basic
data are subjected to frequent changes, incorporating these changes into the operations
research models is very expensive. However, a fairly good solution at present may be more

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desirable than a perfect operations research solution available in future or after some time. iv)
Non-quantifiable Factors When all the factors related to a problem can be quantifiable only
then operations research provides solution otherwise not. The non-quantifiable factors are not
incorporated in O.R. models. Importantly O.R. models do not take into account emotional
factors or qualitative factors. v) Implementation Once the decision has been taken it should
be implemented. The implementation of decisions is a delicate task. This task must take into
account the complexities of human relations and behavior and in some times only the
psychological factors. 1.8 Summary Operations Research is relatively a new discipline, which
originated in World War II, and became very popular throughout the world. India is one of
the few first countries in the world who started using operations research. Operations
Research is used successfully not only in military/army operations but also in business,
government and industry. Now a day’s operations research is almost used in all the fields.
Proposing a definition to the operations research is a difficult one, because its boundary and
content are not fixed. The tools for operations search is provided from the subject’s viz.
economics, engineering, mathematics, statistics, psychology, etc., which helps to choose
possible alternative courses of action. The operations research tool/techniques include linear
programming, non-linear programming, dynamic programming, integer programming,
Markov process, queuing theory, etc. Operations Research has a number of applications.
Similarly it has a number of limitations, which is basically related to the time, money, and the
problem involves in the model building. Day-byday operations research gaining acceptance
because it improve decision making effectiveness of the managers. Almost all the areas of
business use the operations research for decision making.

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